Business news and markets: as it happened April 23, 2013

Markets rise on ECB rate cut hopes, US manufacturing slows in April and
Cyprus' finance minister says he believes the parliament will approve the
bail-out.

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The 10-year bond yield for French gilts fell to an all-time low of 1.074 earlier today. Spanish and Italian 10-year bond yields slid to their lowest since November 2010.Photo: Bloomberg News

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The slower expansion in US manufacturing was partly due to the weakest rise in new orders in six months, said MarkitPhoto: ALAMY

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HSBC said 3,166 UK jobs would be affected by the latest wave of cuts, but that it expects to re-employ just over 2,000 of the staff.Photo: GEOFF PUGH

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The Cypriot parliament threw out the original plan for a levy on guaranteed deposits below €100,000 Photo: EPAPhoto: EPA

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Public borrowing, excluding some of the effects of bank bail-outs and a boost from Royal Mail pension assets, was £114.2bn in 2012/13, down from £120.9bn last year.Photo: PA

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Markit's preliminary manufacturing purchasing manager's index gave a preliminary reading of 50.5 in April, down from 51.6 in April, showing that while the sector is still growing, that the pace has slowed. Any reading over 50 indicates expansion.Photo: Reuters

Latest

17.40 On that note, we're closing the blog for today. See you bright and early tomorrrow morning.

17.30 France has launched a probe into HSBC over allegations that it helped clients in France to avoid tax, according to the French prosecutor's office. The bank declined to comment when asked by Reuters.

16.59 European stock markets, boosted by hopes of a further interest rate cut by the European Central Bank, have managed to carry the day's strength into the close. The FTSE 100 has finished up 2pc at 6,406.12, the Cac 40 in France has jumped 3.6pc, Spain's Ibex has leapt 3.3pc and the German Dax is up 2.4pc.

Here is William Nicholls, a dealer at spread-betting firm Capital Spreads, with his final thoughts on the day's action :

The ‘risk-on’ switch was very convincingly pressed this morning in what will be a welcome relief to investors. Nervousness and downward sentiment appears to have been entirely forgotten overnight as the FTSE finds itself more than 100 points to the good this afternoon.

Speculation that the Eurozone may have to take early measures in order to stimulate growth after some weak numbers across the board was a boost to the UK - Europe being such a vital source of trade.

16.42 Portugal has issued a plan for growth in which it will aim to increase exports to 50pc of GDP from current levels of 29pc, give businesses more access to credit, and "significantly" reduce the country's corporation tax rate.

The government outlined the plans in a statement following a cabinet meeting.

Alvaro Santos Pereira, the country's economy minister, added:

We want more investment and the main instrument here is the reform of the company tax that we intend to carry out via a significant decrease in tax rates to make investment more attractive [...] The tax decrease will have to be gradual.

16.20 If you have more than €100,000 (£85,000) in the bank and you live in a country that's in danger of being rescued by international lenders, listen up, because your savings probably aren't safe.

The European Parliament's lead negotiator on rules for dealing with failing banks said that parliament would likely back legislation imposing losses on wealthier depositors.

Gunnar Hokmark, a Swedish conservative, said most deposits would not be protected under the proposals. But, he added:

There is a very clear exception for all deposits below €100,000.

Talks are underway to finalise EU rules on crisis-hit banks following the bailout of Cyprus, in which the savings of all depositors were originally going to be raided.

The plan was later changed amid a massive public backlash. The European Parliament's backing is needed for any proposals to become law.

15.44 The Swiss finance ministry has expressed its willingness to explore the automatic exchange of banking information to support a concerted battle against tax evasion, provided a global standard for doing so is created, according to news agency Agence-France Presse.

A spokesman from the ministry told AFP that such a standard "must encompass all the large American, European and Asian financial centres" and insisted that Switzerland already lives up to its international obligations in terms of combatting money-laundering, "unlike the financial centres on the American continent and a number of offshore centres."

Photo: Alamy

15.05 European shares are continuing to rise amid hopes that ECB policymakers will cut interest rates in a bid to spur growth when they meet next week following news that eurozone private sector activity continued its steady decline in April (see 09.20).

The Cac 40 index in France is up 2.91pc, Spain's Ibex has climbed 2.94pc and the German Dax has gained 2.07pc. London's FTSE 100 has also kicked-on strongly and has risen 1.8pc so far today.

Borrowing costs are also dipping to record lows on rate-cut speculation. The 10-year bond yield for French gilts fell to an all-time low of 1.074 earlier today. Spanish and Italian 10-year bond yields slid to their lowest since November 2010.

The Dax has gained 2.07pc as investors bet on an ECB rate cut. Photo: Reuters

14.55 Sixteen Asia-Pacific countires plan to start talks next month on a regional free trade agreement that would cover more than half the world's population, according to news agency Agence-France Presse.

The so-called regional economic partnership (RCEP) covers the 10 members of the Association of South-East Asian nations (ASEAN) - Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam - as well as Australia, China, India, Japan, New Zealand and South Korea.

According to the latest draft of the chairman's end-of-meeting statement, obtained by AFP, ASEAN leaders will agree that "negotiations will commence in May 2013 with a view to completing them by 2015."

14.44 Stock market trading is underway in the US, with the positive sentiment in Europe rubbing-off on dealers in the States. The Dow Jones Industrial Average is up about 100 points, or 0.7pc, mirroring the moves seen on this side of the pond: The FTSE 100 has jumped 1.8pc, France's Cac 40 is 2.9pc better, the Ibex in Spain has climbed 2.6pc and Germany's Dax has leapt 2pc.

14.27 The Hungarian Central Bank has cut its interest rates to a record low of 4.75pc in an effort to spur growth in the recession-gripped country.

Hungary, an EU member state, saw its economy shrink 1.7pc last year.

14.15US manufacturing expanded at its slowest pace since last October, according to a key index. Markit Economics' flash manufacturing PMI for the US gave a reading of 52 in April, down from 54.6 in March. A figure over 50 indicates expansion.

The slower expansion was partly due to the weakest rise in new orders in six months.

Chris Williamson, chief economist at Markit, said the reading reflected the squeeze on domestic expenditure as households brace themselves for tax increases and government spending cuts:

The biggest monthly fall in the PMI since June 2010 raises concerns that the U.S. manufacturing expansion is losing momentum rapidly as businesses and households worry about the impact of tax hikes and government spending cuts. The PMI suggests that output growth has slowed from an annual pace approaching 8% earlier in the year to only 2% at the start of the second quarter.

While this week’s first quarter GDP numbers may therefore bring some brighter news on the economy, the picture looks to have already begun to darken again, with GDP growth set to weaken in the second quarter.

Exports remain a bright spot, rising at the fastest rate since December, but a weakening of demand from domestic customers meant overall order books showed the smallest increase since October. With backlogs of work falling at one of the fastest rates since the height of the financial crisis, firms will also look to cut headcounts soon unless demand improves in the coming months.

From a policy perspective, a marked easing in inflationary pressures is signalled in manufacturing supply chains, which should take further heat out of consumer price inflation.

13.50 Irish finance minister Michael Noonan said the nation should not expect a "spending spree" despite the government being granted extra breathing space by its lenders this year.

He said Ireland will invest in its economy if it has the capacity to do so once its troika-imposed targets are met.

We have laid out a programme for correction and we should stick to the programme and stick to the targets in the programme.

Having done that, if there is spare cash around, we should use that money for investment purposes to grow the economy and get people back to work. We shouldn't, just because we are making progress, go on some sort of spending spree.

Irish finance minister Michael Noonan. Photo:Getty

13.32 The Bank of England's Ian McCafferty has admitted that the UK recovery has been "lethargic" but said he remained hopeful for a "modest pick-up" this year.

In a speech at a conference on women in business, in Coventry, he pointed out that if GDP was adjusted to strip out particularly sharp falls in construction and North Sea oil output, then the rest of the economy, which accounts for more than 90pc of GDP, grew by 1.2pc last year.

He argued that credit conditions are improving, partly thanks to the Funding for Lending Scheme, business sentiment is picking up, and that the international outlook is improving amid signs that the slowdown in China is ending and the US recovery is gaining momentum.

Mr McCafferty, who is a member of the Bank's rate-setting committee, concluded:

On balance, I think the outlook is now looking more encouraging than for some time. Of course, there remain substantial risks that may still knock us off course, not least from the challenges facing the euro area, and if required, the MPC stands ready to respond.

Ian McCafferty, Monetary Policy Committee member at the Bank of England.

13.07 Poor eurozone services and manufacturing data out today is spurring hopes of an interest rate cut by the European Central Bank next week. That's helping stock markets make healthy gains this afternoon, as are falling sovereign bond yields among Europe's peripheral nations. The Cac 40 index in France is up 2.3pc, Spain's Ibex has climbed 1.9pc and the German Dax has gained 1.3pc. London's FTSE 100 has also kicked-on strongly and has risen 1.3pc so far today.

Lord Deighton received his knighthood following the 2012 Games, for which he headed up the organising committee. Photo: Rex Features

12.45HSBC is to axe 1,149 British jobs in another round of redundancies to save money and slim down the bank.

It said 3,166 UK jobs would be affected by the latest wave of cuts, but that it expects to re-employ just over 2,000 of the staff.

The cuts will mostly come from wealth management, as the bank trims down this side of operations to focus on retail banking.

12.30 Energy giant EDF has announced it is cutting jobs at its Hinkley Point C site in Somerset.

The company is in the throes of negotiations with the government over its proposal to build the first new British nuclear plant in a generation, with EDF seeking a guaranteed minimum price per unit of electricity to ensure profitability of the project.

It said it was axing jobs to "control costs", adding that "much activity including further detailed pre-construction engineering work will continue ahead of the later construction phase."

But the move has raised questions over whether EDF is piling pressure on the government to bow to demands over the figure to be put on the minimum price guarantee.

12.20 In an investor vote of confidence for the French economy, ten-year borrowing costs have dropped to a record low. French 10-year bond yield is currently 1.074pc.

Photo: PA

12.16 As expected, company earnings are having a big impact on individual stocks today, with both ARM and Associated British Foods receiving a boost from their well-received numbers. With the deluge of results only going to get heavier as the week progresses, equity strategists at UBS have taken a look at what the earnings season may hold for companies across Europe:

The European reporting season begins in earnest this week with over 90 companies reporting. Q4 was actually the worst reporting season for six quarters in terms of net positive surprises. We suspect Q1 will also be relatively weak: global PMI’s were higher in Q1, but for the first time in 18 months the euro is no longer a tailwind. The recent sharp fall in commodity prices has happened too late to impact the Q1 numbers, but will obviously be in the guidance for commodity producers.

11.55Spain's economic contraction slowed down in the first three months of this year, according to the latest bulletin from the country's central bank.

Spanish GDP fell 0.5pc in the first quarter, after dropping 0.8pc, the steepest fall in three years, between October and December last year.

Spain's economy shrank at a slower pace in the first quarter of 2013. Photo:AP

11.46 In Italy, borrowing costs have fallen to their lowest in nearly two and a half years amid hopes of political stability following the re-election of Georgio Napolitano as president. Ten-year bond yields fell as low as 3.969pc on Tuesday, falling below 4pc for the first time since November 2010

Giorgio Napolitano, who was given an unprecedented second term as president after being re-elected last week. Photo: AFP/Getty Images

11.40 Economist Howard Archer of IHS Global Insight does not see UK factory orders picking up any time soon. Reacting to the surprise fall in factory orders according to the CBI index, he said:

Despite the signs of increased optimism among manufacturers, the April CBI survey broadly reinforces the view that the sector still faces tough domestic and international conditions that are likely to constrain activity in the near term at least.

Domestic demand for manufactured goods is handicapped by current muted investment intentions and tightening public spending. Furthermore, consumers’ purchasing power has come under renewed pressure from a move back up in inflation to a 2.8% in March (from 2.2% last September) and muted earnings growth.

On top of this, a still uncertain and difficult economic environment is likely still causing some orders to be delayed or even cancelled. Meanwhile, relatively muted global economic growth, and Eurozone economic weakness in particular, is currently still a constraint for foreign demand for UK manufactured goods.

11.30 With the FTSE 100 continuing to strengthen this morning – the benchmark index is now up 51 points, or 0.8pc, at 6,332 – David Madden, market analyst at spread-betting company IG, is looking ahead to the factors that are likely to influence trading in the US. Disappointing company results are expected to weigh on investor sentiment across the pond:

We are calling the Dow down 30 points at 14,537, after a second consecutive fall in earnings from heavy machinery manufacturer Caterpillar continues to weigh on investors' minds. Tech giant Apple reports its earnings after the close tonight, with investors already gearing themselves up for a drop in profit for the first time in over a decade.

Caterpillar, the maker of heavyweight earthmovers and a bellwether of the global economy, reported a sharp drop in quarterly profits on Monday, hit by the slowdown in mining.

11.20 Falling demand has led to a surprise fall in UK factory orders for March, according to the latest data from the Confederation of British Industry (CBI).

The CBI's index of new factory orders fell to a two-and-a-half year low of minus 25, from minus 15.

Stephen Gifford, the CBI's director of economics, said:

This quarter was a mixed bag for manufacturers, with new orders disappointing because of a decline in domestic demand, but output did increase.

Although weaker sterling has eased concerns about international competitiveness, manufacturers highlight the potentially chilling effect of political and economic instability abroad on export orders, such as the Cyprus crisis.

The contraction in Germany was attributed by Markit economist Tim Moore to clients cutting spending amid concern about the outlook for southern Europe.

11.07 More from the Cypriot finance minister, who also told Reuters that a sell-off of the island's gold reserves was "not a priority", and could even be averted if alternative sources of fundraising are found.

Cyprus must find €13bn itself, with only €10bn provided by the EU and IMF.

We shall do whatever it takes, we shall meet all fiscal targets. I am sure we shall succeed in gathering the amounts which remain our responsibility in order to avoid any need to come back with a new (adjustment) programme.

So long as we are able to meet the financial element of our commitments I think all possibilities should be explored and they will be explored.

The same applies not only for that particular issue but the whole framework of our commitments. What I feel it is necessary to repeat is our commitment for fulfilling everything without hesitation.

Harris Georgiades replaced Michalis Sarris last month after the former finance minister resigned just a few weeks into office. Photo: AP

10.41 Cypriot finance minister Harris Georgiades has said he believes the island's divided parliament will approve the bail-out deal, having already approved most of the bail-out terms, such as increasing corporate tax, spending cuts and tax increases in separate votes.

I think parliament will acknowledge there is no alternative at this point.

10.30 Shares in the Greek gambling monopolyOPAP fell this morning after the government rejected the only valid bid to seek a higher offer.

Emma Delta, a Greek-Czech investment fund, made a €622m bid, undervaluing OPAP by around 16pc based on its closing price on Monday.

The sale forms part of a mass sell-off of Greece's state assets, which have a troika-imposed target of raising €2.6bn this year. OPAP is supposed to account for a large part of that target and any shortfall would mean that the EU and the IMF would need to stump up more money to cover Greece's funding needs.

Shares in OPAP fell as much as 5.37pc on the Athens Stock Exchange this morning.

10.18 Back in the London stock market, analysts at heavyweight broker Goldman Sachs have brought pressure to bear on cash-and-carry wholesaler Booker by cutting their rating on the FTSE 250 group to “neutral” from “buy”. The Goldman experts reduced their stock recommendation on the company, which last year bought Metro’s cash and carry business Makro for £140m, on valuation grounds after Booker shares made significant gains over the past year:

The shares are up 36pc over the last 12 months. While we continue to view it as a well positioned company within UK food retail, the shares now trade at a 65pc premium to the European food retail sector (ex-Ocado). We feel this fairly captures the growth opportunity from the ongoing integration of the Makro business over the next three to four years.

The cautious appraisal from Goldman has sent Booker shares sliding 2.1pc, among the heaviest fallers on the mid-cap index.

10.07 Revisiting the public finance figures, it's worth noting that even stripping out cash transfers from the Bank of England, borrowing still fell, albeit only slightly.

After removing the effects of the transfer of the Royal Mail Pension Plan and the transfers from the Bank of England Asset Purchase Facility the first 2012/13 estimate of public sector net borrowing is £300m lower than last year's borrowing at £120.6bn.

George Osborne is already two years behind schedule on wiping out the budget deficit. Photo: PA

09.52 On the FTSE 250, exploration group Premier Oil is in demand and has risen 3.3pc on news of an two discoveries: an oil find at the Bonneville exploration well and its side-track in the North Sea, and a gas discovery at the Matang-1 well in Indonesia. The company also pleased investors by confirming that testing at its Luno II well in Norway has started, with results due before the end of April. This is what chief executive Simon Lockett had to say this morning:

We are delighted with the strong start to our 2013 exploration drilling programme with the previously announced discovery at Luno II and now the discoveries at Bonneville and Matang. We look forward to the outcome of the test programmes at Luno II and Matang while the Bonneville discoveries will be tied back to our important Catcher area development, which is targeted for project sanction by year-end.

Looking at the broader picture, the benchmark FTSE 100 remains in positive territory and is now up 25 points.

09.50The news will come as a huge relief for the embattled Chancellor, who this week faced calls from IMF chief economist Oliveir Blanchard to rethink his austerity programme.

Also last week IMF chief Christine Lagarde admitted that UK growth was "not good", hinting that Osborne could be pressed to abandon 'Plan A' following the Fund's annual 'Article IV' review of the economy.

Osborne is already at least two years behind schedule on his deficit reduction plan. When he became Chancellor in 2010 he pledged to wipe out Britain's budget deficit by 2014/15, but by his latest reckoning this will not happen until 2016/17.

09.34 The latest UK public finance data from the ONS shows that Britain's budget deficit fell slightly last year. Public borrowing, excluding some of the effects of bank bail-outs and a boost from Royal Mail pension assets, was £114.2bn in 2012/13.

09.27 Chris Williamson, chief economist at Markit, warned that April's reading could point to a hastening decline in GDP in the second quarter of the year. He said:

Although the PMI was unchanged in April, the survey is signalling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease.

Thanks to an upturn in the survey at the start of the year, the PMI suggests that euro area GDP fell by around 0.2-0.3pc in the first quarter after a 0.6pc drop at the end of last year. However, the April reading points to a 0.4pc rate of decline, with downside risks. Worryingly, the rate of loss of new business gathered further momentum, suggesting that activity and employment could fall at steeper rates in May.

The renewed decline in Germany will also raise fears that the region’s largest growth engine has moved into reverse, thereby acting as a drag on the region at the same time as particularly steep downturns persist in France, Italy and Spain.

Policymakers will at least be relieved to see inflationary pressures cooling, which could further open the door to renewed policy stimulus.

09.20Eurozone private sector activity continued its steady decline in April, according to preliminary data from Markit. The composite PMIfor the 17-nation bloc held steady at 46.5 in April, indicating that activity is falling but at the same rate as in March.

The reading is the 19th sub-50 figure - which signals contraction - in 20 months, the exception being a marginal increase in January 2012.

09.10 Power systems company Rolls Royce has announced the sale of its 50pc stake in the RTM322 helicopter engine programme, which powers the Apache, EH101 Merlin and NH90 choppers, to Safran-owned Turbomeca for €293m.

The Apache helicopter, powered by the RTM322 engine.

09.00 Chief business correspondent Louise Armitstead previews the day ahead in business in her city briefing (sign up for the morning email here).

The National Statistics office is due to release the latest figures on public sector finances, including crucial Government net borrowing and debt. The CBI is releasing its quarterly industrial trends survey. Mark Carney, who becomes Governor of the Bank of England in July, is being grilled by Canada's parliamentary standing committee on finance.

Later in America, Apple is releasing its results for the second quarter. The tech giant is under pressure to perform after its shares dipped below $400 last week for the first time since 2011 amid concerns that the shine is coming off the stockmarket darling. Wells Fargo is due to report its full year results.

The City Week financial services forum continues in London. Yesterday the European Union was charged with over-regulation amid criticism of its plans for a Financial Transactions Tax (FTT) and half-formed banking union. Today there's a focus on infrastructure and trade with speakers including Lord Green, the Trade Minister, Jim O'Neill, the chairman of Goldman Sachs Asset Management, and Xavier Rolet, the boss of the London Stock Exchange.

The Treasury Select Committee is taking evidence on the impact of Quantitative Easing; the House of Lords Economic Affairs Committee has a hearing on corporate taxation, including evasion; and Andrea Leadsom MP is leading a Hansard Society debate on the "EU and democratic deficit".

Mark Carney, incoming governor of the Bank of England, will appear before Canada's parliamentary standing committee on finance.

08.57 Among the movers and shakers on the FTSE 100 are shares in Associated British Foods, the sugar-to-clothing conglomerate, which have put on 1.2pc after the group reported impressive first-half numbers. ABF posted a 25pc jump in first-half adjusted pre-tax profits, helped by the performance its popular Primark chain which saw a 24pc rise in overall sales and a 7pc rise in like-for-like sales. Here is what Panmure Gordon analyst Graham Jones thought of the results:

ABF has delivered an excellent first-half performance, with profit before tax rising by 25pc to £452m and earnings per share up 22pc to 39.9p, 7pc and 5pc ahead of our forecasts respectively. Primark was the undoubted star of the show, with sales rising 24pc and profits rising by 55pc.

[...]The shares have been the best performer in our coverage universe over the past 12 months, outperforming the UK market by 37pc. That said, we think the attractions of the stock remain and we nudge up our price target from 1750p to 1800p.

The latest figures suggest any rebound in GDP over the first quarter could be rather short-lived, not least as the manufacturing and service sectors both recorded faster declines in new orders than one month earlier.

Weaker demand was attributed to subdued business confidence across the euro area, with clients cutting spending amid concerns about the economic outlook for southern Europe. In the manufacturing sector, there were also reports that destocking efforts had led to reduced production requirements.

Meanwhile, lower purchasing activity and softer global demand for raw materials helped alleviate strains on supplier delivery times and this contributed to another sharp drop in input costs across the manufacturing sector.

Germany's manufacturing PMI fell in April to 47.9 from 49

08.50 And in Germany, April's composite private sector PMI - comprising services and manufacturing - gave a reading under 50, indicating contraction, for the first time since November.

Composite PMI fell to 48.8 from 50.6 in March, reflecting a fall in both manufacturing PMI, which fell to 47.9 from 49, and services PMI, which dropped to 49.2 from 50.9.

The decrease in manufacturing production was the first so far in 2013, while the drop in service sector activity was the first in five months and the most marked since October.

08.42 This morning a raft of flash PMIs from across the world will be released.

The French figures are out and show that the downturn in the country's private sector eased off in April, though it is still shrinking. Its composite PMI rose to a four-month high of 44.2 from 41.2 in March. Any figure under 50 signals contraction.

08.15 Share trading is underway in London and it’s been a slow start, with the FTSE 100 edging up just 10 points to 6,290.89. Nevertheless, shares in chip designer ARM Holdings are standing out from the crowd with an impressive 7pc gain. Traders have been enthused by the blue-chip’s first-quarter numbers, which showed a 44pc jump in adjusted pre-tax profits to £89.4m. The number of chips shipped climbed 35pc to 2.6bn.

08.05 In corporate news, Primark-owner Associated British Foods has posted a strong set of first half results, largely driven by the clothing retailer, but warned that it expects slower growth in the second half.

The Primark success story continues. Trading in the period was very strong, the profit margin was much improved, customers in continental Europe have taken enthusiastically to the Primark brand and there is very real momentum in the addition of selling space. Encouraged by this success, capital investment will continue.

07.50 The Organisation for Economic Co-operation and Development (OECD) said on Tuesday that it supported Japan's efforts to fight deflation, but urged Tokyo to address its massive debt pile.

Randall Jones, a senior economist at the OECD, also said it was too difficult to predict when the Bank of Japan will meet its 2pc inflation goal, a target which the new governor Haruhiko Kuroda is determined to hit within two years. Mr Jones said a three-year timeframe would be acceptable.

In its annual report on the Japanese economy, it said:

Ending 15 years of deflation is a priority. The new government's resolve to revitalise the economy through a three-pronged strategy combining bold monetary policy, flexible fiscal policy and a growth strategy, is most encouraging

[But] stopping and reversing the rise in the debt-to-GDP ratio is crucial.

07.30Asian markets fell overnight following news that manufacturing activity in the world's second biggest economy slowed in April as exports were hit by sluggish overseas demand, according to a key index.

Markit's preliminary manufacturing purchasing manager's index gave a preliminary reading of 50.5 in April, down from 51.6 in April, showing that while the sector is still growing, that the pace has slowed. Any reading over 50 indicates expansion.

The figures will exacerbate concerns about the strength of the Chinese economy, coming just a week after China revealed weaker-than-expected GDP growth figures showing that expansion slowed in the first three quarters of the year.

Hong Kong's Hang Seng has fallen 1.14pc and the Shanghai Shenzhen CSI 300 index is down 2.79pc. The Shanghai Composite has dropped 2.17pc. The Nikkei dropped 0.29pc, breaking a rally which saw it climb just shy of a five-year high on Monday morning.

Commodities prices also edged down following the news. Brent crude slid back below $100 per barrel, while copper extended its decline to hit an 18 month low. Copper for three-month delivery on the London Metal Exchange fell as low as $6,845 a metric tonne.

07.10 Our business pages lead with news that German Chancellor Angela Merkel has stressed that "Europe must have the last word" on some policy issues as she declared that eurozone nations should be prepared to cede sovereignty in some policy areas if the continent is to avoid decline.

The Independent leads with news that Vince Cable is on a mission to save British pubs. The Business Secretary is planning to unleash a new code of practice, backed by a "powerful" watchdog to protect tenant landlords from being "overcharged" for beer and rent.

The Guardian reports that trade unions will fight the government's privatisation of Royal Mail. Frances O'Grady, the general secretary of the Trades Union Congress, which represents 53 trade unions and nearly 6 million union members, told the Guardian that the British public are "overwhelmingly against privatisation".

07.00 A quick look at today's front pages...

We lead with news that the government is weighing up proposals for hotels to provide hospital accommodation in a bid to tackle 'bed blocking'. An idea borrowed from Scandinavia, the beds would be used by patients who do not need specialist equipment but are not well enough to return home.

The Guardian reports that teenage Boston bombing suspect Dzhokhar Tsaranev could face the death sentence if found guilty.

The Independent leads with news that MPs have called for Google boss Eric Schmidt to be stripped of his role as government adviser after he suggested that his company's contribution to the British economy was more important than how much tax it paid.

The Times reports that MI5 and MI6 chiefs have warned the government that public safety will be put at risk if their departmental budgets are cut any further.

06.55 Good morning and welcome to our new daily business and markets live blog, your one stop shop for all the breaking business stories of the day.